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A few weeks ago, New York’s highest court unanimously confirmed what I’ve been telling my clients for years:
There are no do-overs in divorce.
The court’s decision stemmed from controversy surrounding the divorce of Steven Simkin and Laura Blank, a case that The New York Times described as “one of the most unusual lawsuits resulting from the Madoff fraud — and one that riveted the matrimonial bar.”
What made this lawsuit so remarkable? Well, for starters, Simkin is a partner at one of the country’s most prominent and powerful law firms, and the division of property in this divorce involved millions of dollars of assets. But even so, the Simkin-Blank divorce was settled uneventfully back in 2006, and it’s likely it would have stayed out of the headlines, if not for one thing:
Simkin requested a do-over.
Why did he do that? Well, he requested a do-over because as part of the divorce settlement, the couple split a fortune in excess of $13 million, of which $5.4 million was invested with Bernard Madoff. After the divorce, Simkin continued to keep a sizeable amount of money in these investments. But Blank didn’t. Instead, she opted to receive her divorce settlement proceeds in cash (some $6.25 million) and real estate.
Fast-forward to 2008 when the Madoff Ponzi scheme was exposed, and you’ll realize his predicament. Simkin lost millions because of the Madoff fraud, and he felt the divorce settlement should be revised. Essentially, he wanted Blank to compensate him for the losses he sustained.
Naturally, she refused. So, he sued. Initially, a trial judge dismissed Simkin’s suit, but shortly thereafter a New York appellate court ruled it could go forward. Now, the New York Court of Appeals has rejected his argument once and for all.
“This situation, however sympathetic, is more akin to a martial asset that unexpectedly loses value after dissolution of a marriage. The asset had value at the time of the settlement but the purported value did not remain consistent,” wrote Judge Victoria A. Graffeo, according to Bloomberg Businessweek.
I couldn’t agree more. Every divorce settlement involves the valuation of assets, and there’s an implicit understanding that the value of these assets may change over time.
After all, when a couple finalizes their divorce, asset valuations are completed. Terms were set. Compromises were made. Divisions were agreed to. And, finally, settlements were reached. These settlements cannot be revised whenever one party suffers a loss –just as they cannot be revised when one party benefits from a significant gain. (Can you imagine the chaos that would ensue if the courts did allow post-settlement asset value adjustments?)
As divorce attorney Caroline Krauss-Browne, partner at Blank Rome, points out, there is an overriding public policy which supports finality both in negotiated settlements (preferred by courts) and, if the parties are unable to agree, decisions after trial.
“Especially in the current environment of slashed budgets and resulting staff cuts, courts do not have the man-power to handle the opening flood-gates of claims made by disgruntled former spouses who, in hindsight, think the assets they got are less valuable or more valuable than those retained by their ex,” she explains. “Additionally, not only do litigants rely on the end result in living their post-divorce lives, but changing one term could upend other terms which made up the overall package. For example, the issues of child support and spousal support are inextricably intertwined with asset allocation. If a wife is walking away with millions of dollars of assets, she is unlikely to receive a large or lengthy award of spousal support and she is more likely to make some contribution toward the support of the children. And vice versa. It’s like a house of cards — you can’t pull one out one card without the entire house coming down. And what a mess that would make.”
So, if you’re a woman who’s contemplating divorce, please understand this:
In divorce, there are no do-overs when it comes to the division of assets . . . and quite simply, that means you must get it right the first time. (In rare instances, there can be an exception to this rule. For example, if it is discovered after a divorce is finalized that there were previously undisclosed hidden assets, a judge might rule to revise a settlement agreement.)
Alimony and child support are different
You must also keep in mind that alimony and child support can be treated differently than the division of assets. Alimony and child support can be modified (either up or down) under certain conditions. (Perhaps you recall the ex-NFL wives who worried about reduction in their alimony payments when NFL players were in labor contract dispute last year?)
So as I see it, your course of action is clear. First, assemble a qualified divorce team. Then, have a comprehensive lifestyle analysis and your financial affidavits prepared. This lifestyle analysis will help you: 1) verify the net worth and income and expense statements your husband submits, 2) form an accurate picture of what funds are required to maintain your standard of living, and 3) possibly uncover any assets your husband may be hiding.
Next, carefully consider your options with regard to alimony. At Bedrock Divorce Advisors, it is our belief that an upfront, lump sum payment in lieu of alimony is, in the vast majority of cases, the preferred option if the woman is to be the recipient of alimony. A lump sum payment is a defined amount that, when properly managed, can lead to long-term benefits, and similar to the division of assets, that payment cannot be revised or modified.
Ultimately, your goals are to receive the most equitable distribution of assets possible and to emerge from divorce with a stable financial future. With the right strategy, you can meet both of those goals –provided you steer clear of the likes of Bernie Madoff.
All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.